Activision Blizzard has released its financial report for the final quarter of 2018 today. Immediately before the call, Activision Blizzard began a massive restructuring project, laying off roughly 8% of employees. For a company of 9,600, that's roughly 775 people laid off.\r\rActivision Blizzard Inc stock price has also declined over the past four months, at 68.32 USD one year ago vs 40.11 USD today. With a high of 83.39 USD in early October, the stock took a tumble soon after BlizzCon. Blizzard has not released a new game since Overwatch in 2016, and concerns continue to grow about stagnation with no new upcoming game besides Diablo Immortal announced. The explosive success of Apex Legends also poses a direct threat for investors to COD: Blackout, the Battle Royale mode for Activison's Black Ops 4, as both games share many similarities.\r\rHere are some notes from the call:\r2018 was the most profitable year in the company's history, but they fell short of goals.\rActivision Blizzard's net bookings were a record 7.26 billion, up from 7.16 billion in 2017. \rBlizzard's Q4 was nuanced, with 35M MAU in the quarter. WoW saw expected declines after the expansion launch, and Blizzard had declines in netbookings for Overwatch and Hearthstone.\rBlizzard has a contract with NetEase to publish their games in China through 2023.\r2019 forecasts will not assume that Blizzard will improve monetization as 2018 did.\r2019 is a transition year with less major content releases than is ideal.\rThe company will invest more in development. They are also de-prioritizing initiatives that aren't meeting expectations, as well as in administrative areas.\rApproximately 8% of staff were laid off.\rWarcraft, HS, OW, and Diablo will see an increase of 20% in their development teams in 2019. WoW also has a content pipeline established of regular releases.\rBlizzard is investing in more Warcraft games, as well as Esports leagues and partnerships.\rDiablo headcount will increase substantially as the team works on more unannounced projects\rThey are aggressively hiring talent in the upcoming quarters, and scaling the business for future growth.\rThere are no new major releases for Blizzard in 2019, with the expectations of low financial performance.\rBlizzard thinks the pipeline looks promising beyond 2019, on PC, consoles, and mobile.\rThe increased investment in development meant reducing spending in other areas, which generated the layoffs.\r\r\rNotable quotes from the earnings report:\r\r\u201cWhile our financial results for 2018 were the best in our history, we didn\u2019t realize our full potential. To help us reach our full potential, we have made a number of important leadership changes. These changes should enable us to achieve the many opportunities our industry affords us, especially with our powerful owned franchises, our strong commercial capabilities, our direct digital connections to hundreds of millions of players, and our extraordinarily talented employees.\u201d\r\rFor the year ended December 31, 2018, Activision Blizzard\u2019s net bookings were a record $7.26 billion, as compared with $7.16 billion for 2017, below our prior outlook. Net bookings from digital channels were a record $5.72 billion, as compared with $5.43 billion for 2017, and in-game net bookingB were a record of $4.2 billion.\r\rFor the quarter ended December 31, 2018, Activision Blizzard\u2019s net bookings were a record $2.84 billion, compared with $2.64 billion for the fourth quarter of 2017, below our prior outlook. Net bookingsB from digital channels were a record $1.88 billion, as compared with $1.62 billion for the fourth quarter of 2017, and in-game net bookingsB were a record of $1.2 billion.\r\rIn 2019, the company will increase development investment in its biggest franchises, enabling teams to accelerate the pace and quality of content for their communities and supporting a number of new product initiatives. The number of developers working on Call of Duty, Candy Crush, Overwatch, Warcraft\u00ae, Hearthstone and Diablo\u00ae in aggregate will increase approximately 20% over the course of 2019. The company will fund this greater investment by de-prioritizing initiatives that are not meeting expectations and reducing certain non-development and administrative-related costs across the business. The company is also integrating its global and regional sales and go-to-market, partnerships, and sponsorships capabilities. As part of these restructuring actions, the company expects to incur a GAAP-only pre-tax charge of approximately $150 million, the majority of which is expected to be incurred this year.

Comentarios

Comentario de Kantee

Administrative costs = customer support? Yeah, why would we need that maintained after reaching the best level since the release of WoW.

Comentario de AzraelUltima

on 2019-02-12T16:22:29-06:00

Blizz is focusing on WarCraft "games" and Diablo, huh?

Comentario de KaptainKrunk

on 2019-02-12T16:25:34-06:00

No major releases for 2019.\r\rGreat. We'll get something eventually at least, but it's gonna be a very boring year it seems.

Comentario de Anshlun

on 2019-02-12T16:26:02-06:00

Administrative costs = customer support? Yeah, why would we need that maintained after reaching the best level since the release of WoW.\r\rNot specified, they just mentioned them as "non-developing areas", which is very broad.

Comentario de 57strat

on 2019-02-12T16:27:13-06:00

Record profits, but short of goals. Laying off 8% of staff. That actually sounds about right. Of course context is key. They're laying off some people and increasing manpower in other departments. This happens a lot in the business world. I've seen this at my own place of employment. I'd caution people to not read too much into the layoff part. The lack of new content in 2019 bit is a bit disconcerting though.

Comentario de loudskies

on 2019-02-12T16:30:37-06:00

Record profits, but short of goals. Laying off 8% of staff. That actually sounds about right. Of course context is key. They're laying off some people and increasing manpower in other departments. This happens a lot in the business world. I've seen this at my own place of employment. I'd caution people to not read too much into the layoff part. The lack of new content in 2019 bit is a bit disconcerting though.\r\rI don't think it means lack of WoW content, but lack of new releases. We're definitely getting 8.2, 8.2.5, and probably 8.3 in 2019.

Comentario de 57strat

on 2019-02-12T16:35:46-06:00

I don't think it means lack of WoW content, but lack of new releases. We're definitely getting 8.2, 8.2.5, and probably 8.3 in 2019.\r\rI'm sure they will. I'm talking more generally than just WoW content. To have no game releases in 2019 will definitely test gamers' and stockholders' patience.

Comentario de omedon666

on 2019-02-12T16:42:15-06:00

See here's the thing, 2019 was never going to be big for WoW. Transitional year businesswise (which we're learning now), and a transitional story to move to something big. This makes sense because, as I've said, they are taking up this time (too much of it, IMO) to tell a necessary but uncomfortable story: They're grinding out the last gasp of the faction divide so they can explode into high concept stories aimed at a united player base in the greater WoW universe. Rough as it is to be a player through this story, this is the time to do this.

I expect Blizzcon 2019, announcing products for BEYOND 2019, to be a mind blower for WoW and maybe Diablo. They're turning a ship that they've said many times must turn slow, and they're force-turning it with uncomfortable speed. It's gonna hurt, it's going to be boring, it's going to lean on systems meant to keep us engaged with the game if not the story... but once the ship is turned, the future is bright.

Obviously that future brightness doesn't put food on laid off people's tables. That part is not cool, full stop.

Comentario de KoleBigEars

on 2019-02-12T16:43:01-06:00

Sounds like 2019 is a good time to take a break.

Comentario de dejvk

on 2019-02-12T16:44:57-06:00

I don't think it means lack of WoW content, but lack of new releases. We're definitely getting 8.2, 8.2.5, and probably 8.3 in 2019.\r\rYep yep, but it is generally expected to launch Classic this year, launch W3R this year and also reveal of new expansion this year. The presented plan sounds very very cautious about that though.

Comentario de Salvadore

on 2019-02-12T16:46:15-06:00

Sad to hear about the layoffs, it never feels good to read about the layoff and hope all those people find new jobs soon! \rIt's great to hear that it sounds like Warcraft is back to be the big focus with an even bigger dev team, \rAlso love WoW also has a content pipeline established of regular releases.

Comentario de stubbybob

on 2019-02-12T16:52:06-06:00

Not great news, but not exactly "the sky is falling" that the chicken little neck-beard overlords on Twitch thought.

Comentario de Willblade

on 2019-02-12T16:55:34-06:00

We're doing so well that we're going to cut the staff out of necessity...ok

Comentario de serra2

on 2019-02-12T17:00:43-06:00

Yeah, between the loss of Destiny, the end of HOTS esports and general upkeep, as well as the implied decline of Starcraft 2 support, a restructuring was very likely. While some would likely be able to move to fill positions elsewhere in the company, you are not going to be able to find jobs for all of them.

EDIT: They also have no big releases coming for the year? Ouch. Yeah this was going to be a rough, belt-tightening year. Sucks for everyone.

Comentario de Fenril7

on 2019-02-12T17:08:45-06:00

I fully expect the next expansion named at Blizzcon this year. With 8.2 coming in the summer and the possible next Xpac possibly next late spring or early summer (2020) that means we should have at least an 8.3 and maybe 8.3.5 patches.

If we don't get a patch 8.3 or even 8.3.5 in the fall of 2019, that is another long drought that WoW can't afford.

Comentario de Evolyn1877

on 2019-02-12T17:13:28-06:00

"They are also de-prioritizing initiatives that aren't meeting expectations, as well as in administrative areas."\r\rSerious question. Does the initiative include Diablo, HotS, Overwatch, and SC2?\r\rI'm only a casual player but the games seem stagnant.

Comentario de Enrif

on 2019-02-12T17:18:22-06:00

while this is mixed, this part is the most important for us actually\r\r2019 forecasts will not assume that Blizzard will improve monetization as 2018 did.\r\rnot more lootboxes i guess\r\rbut kidding aside this here are the real good news\r\rWarcraft, HS, OW, and Diablo will see an increase of 20% in their development teams in 2019.\r\rMore Devs is the best way to go for better games